Moody's Investors Service and Standard & Poor's have both reconfirmed Lower Merion Township's Triple-A Bond Credit Rating with a stable outlook, the highest rating attainable. Should municipal bond market conditions remain favorable, the Township plans to hold a competitive bond sale on February 20th, and seek approximately $10 million in new money to fund capital improvements in 2013-2014.
"We are thrilled to once again go to market with the strongest of ratings," said Dean Dortone, Chief Financial Officer. "We anticipate that many lenders will respond to our bond sale with very competitive interest rates - likely the lowest offered by the market that day."
Standard & Poor's assessment noted strong financial management, which has led to the maintenance of what the rating agency regards as "strong finances and very strong reserves." The rating agency called Lower Merion's financial management practices "strong" under its Financial Management Assessment methodology, indicating practices are strong, well embedded, and likely sustainable.
Dortone coordinated presentations by Township financial advisor Public Financial Management (PFM), which included conference calls with Moody's and Standard & Poor's. "In awarding the Triple-A, the rating agencies cited the Township's deep and diverse property tax base, reflected in extremely strong per capita market values, strong financial management and low direct debt levels as a percent of market value," said Doug Cleland, Township Manager.
"Year after year, Lower Merion receives this very exclusive rating, and it is a credit to the day-in and day-out financial leadership of our Township," stated Board Vice-President Paul McElhaney, Chair of the Finance Committee.
Lower Merion Township is the only municipality in Pennsylvania - and one of only six Townships in the United States - with a Triple-A credit rating from both of the largest rating agencies. Only Princeton, Bernards, Mahwah and Mendham townships in New Jersey and Bloomfield Township in Michigan share this with Lower Merion.
"This is great news for the Township - we get to borrow money at the lowest possible interest rates the market will bear and make critical capital improvements," added Board President Elizabeth Rogan. "Our healthy reserve levels, combined with the excellent management of the Township's finances and capital improvement program, cannot be underestimated. Lower Merion Township sells bonds to fund its Capital Improvement Program projects and spread the cost over the life of those projects."
Links to the Standard & Poor's and Moody's assessments of Lower Merion Township will be found on the Township website, at http://www.lowermerion.org/Index.aspx?page=57.
Some observations:
1. Lower Merion, for historical reasons, has the third highest real estate tax base in Pennsylvania, surpassed only by the major cities of Philadelphia and Pittsburgh. It would take mismanagement of truly staggering proportions for Lower Merion Township to lose its AAA rating.
2. There are more than 160 municipalities in the US with AAA bond ratings. Most of them don't bother to buy more than one rating. The fact that LM spends funds to acquire more than one rating is not really something to brag about.
3. Recognizing that the ratings agencies have separate divisions rating municipalities and, say, CDOs, it is amusing that this news is broadcast about two weeks after the US Department of Justice announced $5 billion worth of fraud charges against S&P.
http://www.pbs.org/wgbh/pages/frontline/business-economy-financial-crisis/untouchables/4-reasons-why-the-sp-fraud-lawsuit-may-be-a-game-changer/
Without suggesting that LM's AAA rating isn't soundly based (the chances of LM's defaulting on its bonds are obviously miniscule because of its wealth), it is worth remembering that municipal ratings are subject to exactly the same conflict of interest issue, since they are paid for by the rated entity and there is built-in incentive to be as positive as possible. Reasonable people have suggested abolishing the rating agencies on the ground that they are simply skimmers and grifters.